Profit Efficiency and its Estimation

n this article, we revisit the profit efficiency measurement theory and estimation. We derive a new theoretical result that shows the Nerlovian profit efficiency is a special case of the recently introduced general profit efficiency measure. We also present a new decomposition of profit efficiency. Finally, we also outline a simple way of estimating profit efficiency in the Data Envelopment Analysis (DEA) and Free Disposal Hull (FDH) frameworks, while avoiding the computational intensity of linear programming and circumventing the lack of more detailed data.